MID SESSION MARKET WRAP

The Mid Session Wrap is a report on the biggest movers in the FTSE 100 and macroeconomic news that impacts movements in share prices. The report also previews macroeconomic data that is due to be released over the course of the session.

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Monday, February 06, 2012

FTSE 100 drops on Greece concerns, Dow Jones and S&P seen lower - UPDATE

FTSE 100 drops on Greece concerns, Dow Jones and S&P seen lower - UPDATE

Jittery investors dumped riskier assets this morning, pushing the UK’s blue chip FTSE 100 index down 19 points (0.3 percent) to 5,884 in early afternoon.

The markets are currently focused on Greece, where the ruling coalition is trying to hammer out an agreement to impose further austerity measures in order to secure the much needed €130 billion bailout package from the so-called Troika comprising the EU, the IMF and the ECB.

Greece is under pressure from the EU to accept the terms of the new financial aid package, which include a series of painful reforms.

However, despite setting a deadline of Monday morning to respond to Europe's demands of further budget cuts, Prime Minister Lucas Papademos and other leaders of the ruling coalition have yet to come to an agreement.

“The Greece situation remains an unwelcome distraction to investors,” said chief market strategist at City Index Joshua Raymond.

“One of the key issues surrounding the situation is the fact that nothing seems easy to agree, whilst at the same time, the goalposts consistently appear to move.”

If Greece fails to secure more financial aid, it will likely go into default as soon as March as it is facing a March 20 deadline to pay off a €14.4 billion bond, which it will be unable to do without more help from its lenders.

Oil and gas major Cairn Energy (LON:CNE, up 3.5pct at 338.4p) led the FTSE 100, followed by gold miner Randgold Resources (LON:RRS, up 3.2pct at 7,640p), which today unveiled a strong set of quarterly results and doubled its annual dividend.

Shares in part-nationalised bank Lloyds (LON:LLOY, up 1.8pct at 35.01p) and hedge fund manager Man Group (LON:EMG, up 1.2pct at 138.4p) also were in demand this morning.

Meanwhile, today’s heaviest fallers included commodities trader Glencore (LON:GLEN, down 4pct at 463.35p) after a report in the Financial Times said it has agreed to pay a premium to secure a merger with Xstrata (LON:XTA, down 2.3pct at 1,254p).

Other mining companies including Vedanta Resources (LON:VED, down 3.8pct at 1,308p) and Antofagasta (LON:ANTO, down 1.9pct at 1,372p) also were in decline as base metal prices fell.

US markets

Financial bookmakers are currently anticipating a lower open on Wall Street on the back of the sell-off in European markets.

Futures for the Dow Jones Industrial Average (DJIA) declined 33 points (0.25 percent) in pre-market, while futures for the broader S&P 500 index dropped 3.5 points (0.25 percent).

No major macroeconomic data will be released in the US today. On the corporate front, Hasbro (NYSE:HAS) fell 2.4 percent in pre-market as its quarterly earnings report undershot forecasts.

The toymaker said its net income dropped one percent to US$139.1 million in the fourth quarter compared to the same period of 2010.

The drop in income came despite a four percent increase in revenues to US$1.33 billion.

UK corporate news

Back in the UK, Randgold Resources today reported record profits in 2011, which came as its production and gold prices surged, prompting it to double its annual dividend to 40 cents per share.

Randgold saw its gold output jump 58 percent to 696,023 ounces, reflecting increased contributions from the Loulo complex and the Morila joint venture in Mali and the Tongon project in Côte d'Ivoire, leading to a 259 percent increase in profits to US$433.4 million.

In the FTSE 250, Premier Oil (LON:PMO, down 1pct at 414.7p) said the East Fyne Appraisal well, 21/28a-11, after it encountered oil bearing sands with thickness at the lower end of expectations.

The results of the East Fyne Appraisal well will be incorporated into the Greater Fyne Area plans with Premier set to make a decision whether a commercial development is viable in the second quarter of 2012.

The Sedco 704 rig will now move to drill the Premier-operated Bluebell prospect in license P1466 in the Central North Sea. The results of this well are expected in March 2012.

Fellow midcap oil firm Afren (LON:AFR, down 1pct at 132.8p) reported that Eni has spudded the Nunya-1X exploration well on the Keta block, which is located in the Volta River Basin offshore Eastern Ghana.

The well is targeting Upper Cretaceous deep-marine fan sandstones that are analogous to those that have yielded significant discoveries elsewhere along the West Africa Transform Margin, said Afren.

Elsewhere in the FTSE 250, budget airline easyJet (LON:EZJ, down 2.2pct at 465.7p) reported a 0.4 percent decline in the number of passengers to 3.73 million in January this year compared to the first month of 2010, while load factor rose from 78.9 percent to 81.9 percent.

The total number of passengers for 2011 reached 55.45 million, up 10.2 percent from 2010.


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